Government revises its GDP forecast downward

SLOWDOWN Reduced consumer spending as a result of card abuse was once again identified as a problem weighing heavily on the nation's economy

By Jessie Ho / STAFF REPORTER

The Directorate General of Budget, Accounting and Statistics (DGBAS) yesterday marginally reduced its whole-year GDP forecast, citing slow economic growth in the second quarter incurred from consumer bad debts and stagnant consumer spending.

The DGBAS cut its GDP forecast to 4.28 percent for the year, down from the 4.31 percent it predicted in May.

"The abuse of credit and cash-advance cards dampened consumer spending in the second quarter, discouraging consumers from buying cars and spending on travel," DGBAS minister Hsu Jan-yau (許璋瑤) said at a press briefing.

"Credit-tightening by banks is expected to affect private spending in the next half of the year," he said.

Consumer spending grew by a disappointing 1.7 percent in the first half of the year, and the rate is not expected to increase for the rest of the year, the DGBAS said in a report.

The DGBAS yesterday also revised downward its GDP growth rate forecast for the second quarter to 4.57 percent, from its previous estimate of 4.92 percent.

However, the economy may grow by 4.39 percent in the third quarter, higher than the DGBAS' previous forecast of 4.26 percent, and by 3.31 percent in the fourth quarter, also higher than the 3.24 percent predicted earlier, according to the report.

Standard Chartered Bank said in a report released yesterday that Taiwan is among several countries in Asia that are at risk of a sharp economic downturn in the second half of the year due to weak consumer spending.

The bank's Asia Focus report said Taiwan, Thailand and China, among others, have to boost consumer spending and borrowing to help make up for a projected slowdown in export growth amid a softening US economy towards the end of the year.

Still, the DGBAS is optimistic about the nation's foreign trade performance in the second half of the year. Taiwan's exports and imports increased by 12.9 percent and 9.5 percent respectively in the first half of the year.

The DGBAS said yesterday it forecasts that exports will increase by 8.4 percent in the second half of the year, traditionally the high season for electronics exports.

Imports will rise by 10.7 percent in the next half of the year as a result of high oil prices, it said.

Overall, the nation's exports will grow by 9.1 percent and imports by 5 percent for a trade surplus of US$16.5 billion, according to the DGBAS. Last year's trade surplus totaled NT$14.63 billion.

Private investment will increase slightly by 0.5 percent overall this year from last year, after contracting by 3.8 percent in the first half of the year and growing by a projected 5 percent in the second half of the year as a result of capacity expansion among semiconductor companies, the report said.

Amid increased energy prices, the DGBAS estimated that the consumer price index (CPI) would increase by 1.8 percent from last year. The government hopes to keep CPI growth below 2 percent.

The statistics bureau further predicted that GNP would total NT$11.83 trillion (US$364.2 billion), or a GNP per capita of US$16,024, for this year.

For next year, the GDP is forecast to grow by 4.13 percent, with the CPI rising by 1.92 percent, it said.